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Gaining Australian Exposure Through News Corp

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With a more business-friendly government just elected in Australia, the country suddenly seems like the place to be. We here in the States, however, can sometimes be a bit America-centric with our investments. And that is only natural. It is far easier for us to understand and invest in American companies rather than to go searching for opportunities half a world away. Realizing that, the next order of business is to then be able to identify great American companies that can give us the international exposure we need.

News Corp should break itself up
Now I know what you are thinking: "Break itself up? News Corp? Didn't they just do that only two months ago?" Yes, you would be correct. The 'old' News Corp – now named Twenty-First Century Fox (NASDAQ: FOXA  ) – spun-off its publishing division into the 'new' News Corp (NASDAQ: NWSA  ) earlier this year. In the divorce, Twenty-First Century Fox took with it all of the couple's TV assets. Well, all except those from Australia, which together with other Australian assets form to create the country's largest media company. At 36% of the 'new' News Corp's 2012 revenues, the Australian operations are so large, diverse and dominant that they could be a completely separate company in their own right.

No. 1 in Subscription TV
A 50-50 joint venture between the Australian telecom Telstra (NASDAQOTH: TLSYY  ) and News Corp, Foxtel is Australia's largest subscription TV provider and one of the world's most profitable. With 2.5 million subscribing households (up from 2.3 million a year ago), Foxtel is the provider of choice for more than 30% of the entire population of Australia. 

Although a traditional cable and satellite TV company, Foxtel has recently begun to implement more innovative and forward thinking offerings. Launched on July 30 of this year, Foxtel Play is a Netflix-like Internet subscription service. Unlike Netflix though, which offers a limited selection of shows after they are broadcast on TV, Foxtel Play is actual live TV without the need for a traditional cable/satellite subscription. Subscribers of Foxtel Play can receive more than 40 full (same as cable) live channels and on-demand options though a user's PC, Mac, tablet, smartphone, video game console or Internet connected TV. If only we had something like this in the States...

No. 1 in Sports
100% owned by News Corp, Fox Sports Australia is the country's most watched sports programming provider with more than 9,000 hours of live sports annually. Fox Sports Australia has the largest portfolio of exclusive content popular with Australian sports fans, such as Australian Rules Football, the Rugby World Cup, the Asian Championship League (soccer), and the ICC Cricket World Cup, to name a small few.

Fox Sports Australia has experienced good revenue growth in recent years (from $373 million USD in 2010 to $484 million USD in 2012). Much like America however, the rising costs of sports content around the world will tend to slowly eat away at margins. Though still impressively high at 30.2% in 2012, those margins are down from 35.7% in 2010. That's just the cost of doing business; obtaining great exclusive content that is in high demand.

No. 1 in News
With its corporate origins based in Australia, it should come as small surprise that News Corp is Australia's largest newspaper publisher with 63% of all newspaper circulation and 7 of the top 10 newspapers. Selling over 10.4 million newspapers each week, more than half of Australia's adult population reads a News Corp publication. 

Print newspapers around the world have been on the decline though. Australia is no exception. Print advertising dollars for the overall Australian newspaper industry has declined over the past decade. That is not to say there are no opportunities for growth in the news business. While traditional print is down, online ad dollars have compounded 18% annually over the past five years. And with the largest mobile news network in Australia, News Corp is uniquely positioned to capitalize on this growing demand for online news.

No. 1 in Online Real Estate
The oddball of this media family, online real estate listings are generally not what one would consider as "media." The REA Group is, nonetheless, Australia's largest with 20.6 million visits each month (2.5 times their nearest competitor). Being a publicly traded Australian company, 61.6% owned by News Corp, the majority of the REA's revenues are from its Australian operations. The company does have a growing international presence though, where they are the No.1 real estate site in Italy, No. 1 in Luxembourg and a major player in Hong Kong.

The REA Group is an extremely fast-growing subsidiary of News Corp. During fiscal 2013, the company grew revenues by 21%, earnings per share by 26%, cash balance by 42% and dividends per share by 26%. Country specific, the company grew revenues in Australia, Italy, Luxembourg and Hong Kong by 22%, 11%, 19% and 19% respectively. Clearly the REA Group has been killing it on all fronts, which is why shares of the company are up nearly 5,000% since 2000 and up 147% over the past 12 months (easily destroying the performance of the Australian S&P/ASX 200 stock index).

Foolish Bottom Line
Being America-centric in our investments need not exclude us from the opportunities the rest of the world offers. Gaining significant international exposure could just be a great American multinational company away. And for those looking for Australian exposure after the recent election results, it does not get much better than News Corp with its large, diverse and absolutely dominant Australian assets.


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